So you have hearn about the federal modification loan program that's been designed
by the government and you're wondering whether it will be able to keep you in your home. Here are a few things that you need to know - and should keep in mind before applying for the program.
The Federal Modification Loan Program Is Designed for Those Experiencing Financial Hardship
If you are looking into loan modification programs that will reduce the payment you owe on an investment property, this program isn't for you. The federal program is designed for borrowers looking to change the terms of the loan for their self-occupied, primary residence. Borrowers who take advantage of the program will need to provide proof of residence and efforts will be made to verify the financial hardship statement - such as inquiring of past employers about a job loss - in order to determine eligibility.
The Federal Modification Loan Program Involves Payment Modifications Not Price Modifications
If you are looking to reduce the overall amount that you owe on your home, you'll need to look elsewhere. This loan modification program is about reducing the amount that you pay on your mortgage each month. This is done by lowering interest rates and, in some cases, extending the repayment period of the loan.
The Government's Modification Program Provides Incentives to Participants
In order to encourage banks to participate, the federal government is offering them an incentive to issue loan modifications. Borrowers are also rewarded for consistently making timely payments; once a year, the balance owed will be reduced by $1,000 for consistent on time payments.
The Federal Modifiction Loan Program Is Structured to Benefit Home Owners
Simply put, lenders are not able to modify loans in a way that leads to their own increased profits. Each requested modification must be compared to the initial loan in order to ensure that the banks are not modifying loans only to increase their own cash flow.